How Record Supply Reshaped the South’s Apartment Markets

Although the story of the nation’s South region is fairly simple to summarize (oversupply has curbed otherwise strong demand, resulting in considerable market-level softness in recent years), the region’s more localized storylines are far more complex.

Before exploring the complexity of market-level differences, highlighting the breadth of supply pressure across the region feels like a pre-requisite. As the nation hit a supply level not seen in nearly four decades, the South region captured the lion’s share of that supply.

At the peak, some 235,000-plus units delivered within the South region. And while the pullback since that 2024 peak has been substantial, the 170,000 units delivered in the past year still account for more than 50% of the nation’s supply. Still, such robust supply growth has ultimately masked what has otherwise been a stretch of solid-to-exceptional underlying demand for many of the South region’s metro areas.

Class A’s relative resilience (albeit seemingly drab compared to desired levels of growth) is one indicator of demand depth. Even when the South region’s rents fell by 1.9% in the year-ending 2nd quarter 2026 (ushering in the 12th straight quarter of annualized rent cuts), Class A properties have held firmer. Class A rents grew by 0.3% in the year-ending 2nd quarter 2026 (the seventh-straight quarter with positive annualized rent change in that product class).

But the incongruencies between Class A, Class B and especially Class C performance are substantial in the South region. Class C rents, for example, have fallen by 4.5% over the past 12 months. And unlike Class A and Class B, Class C rent cuts are just now at their deepest level (which happens to be the deepest Class C rent cuts recorded since the Great Financial Crisis).

Supporting the relatively stronger Class A performance appears to be a set of demand drivers informed by economic trends and demographic themes alike. Class A is recording much lower-than-typical turnover as renters stay in place for longer. This may at least be partially tied to fewer move-outs to single family homes due to significantly disjointed costs of owning versus renting. Further, there appears to be some growth in the “renter-by-choice” contingent.

Conversely, Class C is facing a uniquely complex set of headwinds. Reduced international immigration may be dampening demand in some areas. Weak job growth is likely limiting household formation. Inflationary pressures over the past few years have eroded a larger share of wallet among Class C households. And finally, the addition of such robust supply in many metros has invited “filtering” – a process by which improved affordability supports moving-up the price spectrum in hypercompetitive environments.

Most South region metros are dealing with some degree of supply headwinds, but the trend isn’t inclusive of all metros. In fact, the areas that haven’t seen elevated supply pressure (notably Virginia Beach, VA, but also smaller metros like Shreveport, LA; Jackson, MS; El Paso, TX and Columbus, GA, some of which haven’t delivered any new supply in recent years) are growing rents at a rate that exceeds the national average.

But the bottom end of that regional spectrum highlights just how deep the performance challenges run within the South region in particular.

Seven of the South region’s 65 metro areas saw rent cuts of 5% or greater in the past year. Major markets in that tranche include Austin, TX (rents down 5.1%) and San Antonio (rents down 5.8%). But secondary market cuts including those seen in Naples, FL; North Port, FL; and Cape Coral, FL run anywhere from 8% to 10%.

In the middle range includes 17 metro areas where rents fell by at least 2% in the past year and another 20 metro areas where rents declined by up to 2% in the past year. That leaves just 21 metros (less than one-third of the region) with positive year-over-year rent change as of 2nd quarter 2026.

Normalization of supply will likely be the key influence behind most markets and their 2027 performance outcome. Though the depth of cuts seen in some metros will likely be hard to completely unwind in 2027, the expected trajectory of improvement should hold true in many of those metro areas.

The region’s markets where demand headwinds may complicate the pace of recovery include Tampa, Washington, DC, Houston, and San Antonio (though the source of demand softness in those markets ranges from single family/shadow market impacts, migration (including international) impacts or localized economic impacts (e.g., Washington, DC). Some smaller coastal markets (areas where migration trends continue to rebalance) could also lag in their expected recovery timelines.

This post is part of a series analyzing data across the four regions of the U.S. Read the Northeast and Midwest updates, and stay tuned for the West update, coming soon!